Presley wants to buy a new scooter, which is priced at 28,500. She goes to her neighborhood bank to apply for a simple interest loan. The bank offers her the loan with all of the money at a 6.2% interest rate p.a. over a 5 year period. What is the total price she pays for the scooter?

Solution

P res l ey w an t s t o b u y a n e w scoo t er, w hi c h i s p r i ce d a t 28, 500. S h e g oes t o h er n e i g hb or h oo d bank t o a ppl y f or a s im pl e in t eres t l o an . T h e bank o ff ers h er t h e l o an w i t h a ll o f t h e m o n ey a t a 6.2% in t eres t r a t e p . a . o v er a 5 ye a r p er i o d . Wha t i s t h e t o t a l p r i ce s h e p a ys f or t h e scoo t er ?

Principal : 21755.73

Solution steps

Translate the problem into an equation:

28500 = P (1 + 0.062 \cdot 5)

Solve for

P, 28500 = P (1 + 0.062 \cdot 5) : P = 21755.73

Principal : 21755.73